The Blubber

Costco's new employee agreement went into effect this week, raising its minimum wage to $20 per hour and pushing the average wage to over $31 an hour across the U.S. and Canada.

CEO Ron Vachris emphasized the company's commitment to offering top-tier pay and benefits, calling the agreement a reflection of their dedication to supporting employees.

However, this investment in labor isn't without cost. CFO Gary Millerchip noted that the wage increases will create a mid-single-digit headwind to selling, general, and administrative expenses (SG&A).

Key details of the new agreement include:

• An immediate $1 per hour raise for top-scale employees, followed by additional $1 increases in March 2026 and March 2027.
• Paid vacation for first-year employees.
• Up to six weeks of paid vacation for employees with 30 years of service.

Costco's expansion and financial performance

In addition to boosting wages, Costco plans to open 25 new warehouse stores in the upcoming fiscal year. This includes recently launched locations in Brentwood, California, and Sharon, Massachusetts, bringing its total number of U.S. stores to 620.

The wage increase announcement came alongside Costco's latest quarterly earnings, which revealed a 9.1% year-over-year increase in net sales, reaching $62.5 billion. E-commerce performed particularly well, with sales jumping 20.9% last quarter.

The company is also benefiting from its first membership fee increase in seven years, raising the annual cost from $60 to $65. As a result, membership fee income grew 7.4% year over year, contributing 3% to overall fee income last quarter.

Millerchip noted that non-sales revenue like membership fees could become increasingly valuable as consumers become more selective with their spending amid potential inflation and tariff impacts.